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OFT seeks court order against gym management company
The OFT has issued High Court proceedings against a gym management company, Ashbourne Management Services Limited, following concerns about its compliance with consumer credit law and the fairness of its contract terms.
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25/10 11 March 2010
The OFT has issued High Court proceedings against a gym management company, Ashbourne Management Services Limited ('Ashbourne'), following concerns about its compliance with consumer credit law and the fairness of its contract terms.
Ashbourne draws up membership agreements for a number of gyms and then collects members' payments. Under the terms of such agreements, consumers are tied in for minimum periods of up to three years, and are unable to cancel their membership within these minimum periods. Those who try to do so are presented with a bill for the full amount due for the minimum period - often a sum amounting to many hundreds of pounds. If the consumer does not then pay this amount, Ashbourne reports them to a credit reference agency for defaulting on their agreement.
According to numerous complaints received by the OFT and Trading Standards, many consumers were not aware of the full extent of their liability, or that they could not cancel at all within the minimum period. As of July 2009 Ashbourne had registered just under 17,000 defaults with credit reference agencies.
In the OFT's view, the agreements Ashbourne recommends are credit agreements within the meaning of the Consumer Credit Act 1974, because they immediately oblige the consumer to pay a fixed sum and allow them to pay this over a set period of time. As such the agreements should set out clearly and upfront the total amount the consumer is liable to pay, and comply in all other respects with the rules under the Act. In the absence of this, the OFT considers the agreements cannot be enforced without a court order.
Where gym contracts do not fall under the Consumer Credit Act 1974, the OFT believes they should allow consumers to cancel their membership on reasonable terms. Making consumers always pay the full amount for the minimum period is, in the OFT's view, unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
The OFT also objects to Ashbourne's practice of reporting consumers to credit reference agencies, and considers its conduct to be both misleading and aggressive under the Consumer Protection from Unfair Trading Regulations 2008.
Jason Freeman, Legal Director in the OFT's Consumer Group, said:
'It is important that consumers are able to understand the nature and extent of their liabilities before entering into contracts. The Consumer Credit Act sets out rules to ensure this, and we expect traders offering credit to comply with these.
'Likewise, traders should not use unfair contracts or misleading or aggressive practices in order to put pressure on consumers to pay money that the trader may not otherwise be entitled to.
'We have concerns about Ashbourne's practices, but as the company disputes our interpretation of the law we have asked the High Court to rule on this.'
No date has yet been scheduled for the High Court hearing.
NOTES
More...
25/10 11 March 2010
The OFT has issued High Court proceedings against a gym management company, Ashbourne Management Services Limited ('Ashbourne'), following concerns about its compliance with consumer credit law and the fairness of its contract terms.
Ashbourne draws up membership agreements for a number of gyms and then collects members' payments. Under the terms of such agreements, consumers are tied in for minimum periods of up to three years, and are unable to cancel their membership within these minimum periods. Those who try to do so are presented with a bill for the full amount due for the minimum period - often a sum amounting to many hundreds of pounds. If the consumer does not then pay this amount, Ashbourne reports them to a credit reference agency for defaulting on their agreement.
According to numerous complaints received by the OFT and Trading Standards, many consumers were not aware of the full extent of their liability, or that they could not cancel at all within the minimum period. As of July 2009 Ashbourne had registered just under 17,000 defaults with credit reference agencies.
In the OFT's view, the agreements Ashbourne recommends are credit agreements within the meaning of the Consumer Credit Act 1974, because they immediately oblige the consumer to pay a fixed sum and allow them to pay this over a set period of time. As such the agreements should set out clearly and upfront the total amount the consumer is liable to pay, and comply in all other respects with the rules under the Act. In the absence of this, the OFT considers the agreements cannot be enforced without a court order.
Where gym contracts do not fall under the Consumer Credit Act 1974, the OFT believes they should allow consumers to cancel their membership on reasonable terms. Making consumers always pay the full amount for the minimum period is, in the OFT's view, unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
The OFT also objects to Ashbourne's practice of reporting consumers to credit reference agencies, and considers its conduct to be both misleading and aggressive under the Consumer Protection from Unfair Trading Regulations 2008.
Jason Freeman, Legal Director in the OFT's Consumer Group, said:
'It is important that consumers are able to understand the nature and extent of their liabilities before entering into contracts. The Consumer Credit Act sets out rules to ensure this, and we expect traders offering credit to comply with these.
'Likewise, traders should not use unfair contracts or misleading or aggressive practices in order to put pressure on consumers to pay money that the trader may not otherwise be entitled to.
'We have concerns about Ashbourne's practices, but as the company disputes our interpretation of the law we have asked the High Court to rule on this.'
No date has yet been scheduled for the High Court hearing.
NOTES
- Ashbourne Management Services Ltd has a registered office at 29 Warwick Road, Coventry, West Midlands, CV1 2ES
- It is for the High Court to decide whether the OFT's view is correct and that Ashbourne are offering credit or in the alternative whether the disputed terms are unfair under the Unfair Terms in Consumer Contracts Regulations 1999. No date has yet been scheduled for the High Court hearing.
- Download the OFT's Guidance on unfair terms in health and fitness club agreements (pdf 525kb).
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